HSBC’s closely-watched emerging market index indicates that manufacturing growth will slow sharply following a record first quarter.
Monetary tightening in China and Brazil has offset growth in the BRIC nations (Brazil, Russia, India, China) where India and Russia remained relatively strong, HSBC Chief Economist Stephen King told CNBC Wednesday.
“Although output remains above the long-term average, it is below the average seen before the financial crisis," King said. "This easing reflects a moderation in the rate of growth of new orders, especially for manufacturing exports."
Austerity measures and the expected slowdown in the developed markets will see world trade fall, he said.
“We are in a new phase of global economic development," King said. "Export gains for companies in the emerging world have failed to sustain the momentum seen in earlier quarters. The stellar recovery in economic activity across most of the emerging markets seen since the first half of 2009 finally hit a bump in the road.”
Speaking straight after the HSBC emerging market index was released, King said there was some positive news for emerging markets.
“The good news is that emerging markets, having escaped the legacy of excessive debts, should not face the same kinds of financial constraints which will keep the lid on economic activity in the developed world in the years ahead” he said.
The report showed that service sector growth outpaced manufacturing growth for the first time since the crisis. It also found companies in emerging markets are hiring at the fastest pace since the end of 2007, when the credit crisis took hold.